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Explainer: What’s the latest on Biden’s U.S. student loan forgiveness?

February 28 (Reuters) – US President Joe Biden’s plan, first announced in August, to forgive federal student loans has been blocked by two legal challenges. It will be reviewed by the Supreme Court on Tuesday, clouding the financial futures of millions of American students and graduates.

Biden said in November he was confident the plan was legal and announced new, temporary relief for borrowers that could mean their next loan payment isn’t due until August 2023.

WHAT’S THE LATEST?

The nine justices of the US Supreme Court will hear arguments in the Biden administration’s appeal of the two lower court rulings today. The court is expected to rule on the case this spring.

The court said Dec. 1 it would hear Biden’s bid to reinstate his plan after six states challenged allegations that his administration exceeded its powers.

On Nov. 22, Biden said he would extend the pause in student loan payments during the COVID-19 pandemic no later than June 30, 2023, to allow the court to consider his administration’s requests.

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Payments will resume 60 days after the pause ends, Biden said.

WHAT HAPPENS NEXT TO THE COURT CASES?

The Supreme Court has agreed to hear the Biden administration’s request to stay a Nov. 14 decision by the U.S. 8th Circuit Court of Appeals in St. Louis, Missouri, alleging a request for an injunction from Republican-run states of Arkansas , Iowa. Kansas, Missouri, Nebraska and South Carolina.

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The administration also asked judges on Dec. 2 to stay a separate ruling by a Nov. 10 Texas judge appointed by Republican former President Donald Trump that ruled the debt relief plan illegal. The government did so after the New Orleans-based 5th US Circuit Court of Appeals declined to stay the judge’s ruling earlier this week.

WHO IS ELIGIBLE FOR LOAN FORGIVENESS?

The program forgives $10,000 of federal government debt for people earning less than $125,000. It also forgives $10,000 of debt for couples earning less than $250,000 and it forgives up to $20,000 of debt held by Pell Grant holders, who are primarily lower-income borrowers acts.

WHAT IS THE STATUS OF THE APPLICATION?

About 26 million Americans have applied for student loan forgiveness since August, and the US Department of Education has already approved applications for 16 million. The government stopped accepting new applications on Nov. 11 after the Texas judge blocked Biden’s order.

Borrowers who have not yet applied can subscribe to updates via email.

WHAT DO VOTERS SAY?

American voters narrowly back debt relief; About 15% of voters say they could be affected by the plan, according to an Economist/YouGuv poll.

The six Republican-led states that have sued to block Biden’s executive order argue he circumvented Congressional authority and the plan threatens future tax revenues and money made by state entities that invest in or service student loans.

Deep South states will receive the largest benefits per borrower from the Biden order, New York Federal Reserve research shows, including South Carolina, one of the six behind the lawsuit: https://tmsnrt.rs/3fopmYC

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A handful of states could consider forgiveness of student loan debt as taxable income, financial advisors warn.

WHY IS STUDENT DEBT SO HIGH IN THE US?

The cost of higher education in the United States has skyrocketed over the past three decades, doubling at private four-year colleges and universities and rising even more than at public four-year schools, according to a study by the nonprofit College Board. The outstanding student loan balance nearly quadrupled from 2006 to 2019.

US borrowers hold approximately $1.77 trillion in student debt, according to the latest Federal Reserve figures. The majority of these are held by the federal government.

Biden’s student loan forgiveness plan could add $300 billion to $600 billion in the national debt, economists estimate.

Reporting by Heather Timmons in Washington and Nate Raymond in Boston Editing by Josie Kao, Matthew Lewis and Alistair Bell

Our standards: The Thomson Reuters Trust Principles.

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